Mumbai: The Union government is confident of achieving an economic growth rate of around 5.5% in the fiscal year 2012-13, finance minister P. Chidambaram said on Saturday. Advance estimates of the Central Statistics Office put this figure at 5%.

“The economy is challenged but we will come out of it successfully to the high growth path…the growth in the current fiscal year will be closer to 5.5%,” Chidambaram said in Mumbai after formally launching the much-awaited Rajiv Gandhi Equity Savings Scheme (RGESS). “ I have no doubt in my mind that we will come out of the trough. We will climb back to the growth rate of between 6% and 7% next year and then between 7% and 8% the year after,” Chidambaram said.

According to Chidambaram, the economy has recovered from the low-growth phases in the past—4.3% during 2000-2001 and 4% during 2002-2003.

Hit by both the global and domestic factors, India’s economic growth slowed to a nine-year low of 5.3% in the March quarter and is yet to show signs of any major recovery.

The Reserve Bank of India (RBI), in its third quarter monetary policy review on 29 January, had lowered the growth target to 5.5% from 5.8% and the estimate of inflation to 6.8% from 7.5% by the end of March.

Launching the RGESS, Chidambaram said there is a need to attract more investors to financial assets from investing in physical assets, which can be achieved by making the products attractive and simplifying the Know Your Customer (KYC) norms.

Presently, 56% of the total domestic savings are in physical assets, Chdiambaram said.

RGESS, which was announced in the budget for 2012-13, seeks to provide tax benefits to first-time investors in stock market. Under the scheme, an individual with an income of less than Rs.10 lakh would get tax incentives for investing up to Rs.50,000 in the stock market. Noting that the scheme will attract first-time investors, Chidambaram said the government will make necessary changes in the scheme going ahead to make the product more attractive.